3 takeaways from AMD’s ZT Systems grab

AMD is continuing its acquisition streak with the announced purchase of server supplier and cloud computing specialist ZT Systems for $4.9 billion. The acquisition is the latest in a series of steps to strengthen its AI position.

Privately-held ZT Systems, founded in 1994, works closely with chipmakers to design and deploy data center AI compute and storage infrastructure at scale for the largest global cloud companies. Its products include server solutions for storage, GPU/accelerators, high-performance computing, 5G and edge computing.

“Our acquisition of ZT Systems is the next major step in our long-term AI strategy to deliver leadership training and inferencing solutions that can be rapidly deployed at scale across cloud and enterprise customers,” said AMD CEO Lisa Su in a statement.

The deal is expected to close in the first half of 2025. Once that happens, ZT Systems will become a part of AMD’s data center solutions business group. ZT CEO Frank Zhang will lead the manufacturing business, while ZT President Doug Huang will lead the design and customer enablement teams.

So what can we take away from this? A few key things:

1) AMD is ramping up its acquisition pace. The protracted acquisition of Xilinx seemed to dampen the company’s enthusiasm for buyouts. After the deal closed in 2022, there wasn’t any major M&A activity until about a year ago. Since then, AMD has been on an AI-related buying spree. It purchased AI lab Silo last July, picked up open source AI developer Nod.AI in October 2023, and invested $135 million in an Irish R&D lab in June 2023. I expect to see more deals this year.

2) AI systems are becoming increasingly complex. What started out as just a PCI Express card plugged into a standard server has become much more intricate and complex to configure. Nvidia CEO Jensen Huang likes to note that the DGX systems Nvidia sells have tens of thousands of parts. Building and configuring them is difficult, and skills are rare. AMD now has these skills in-house. I wouldn’t be surprised to see Intel and Nvidia purchase small, boutique companies with expertise similar to ZT.

3) I expect AMD will announce its own DGX-like, fully integrated system – notably, AMD will have the advantage of using its own CPUs and and won’t have to purchase them the way Nvidia does.